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IRS Rejects Tax Exempt Status of Non-MSSP ACOs: An Alternate Tax Subsidy Suggestion

 

Executive Summary - November 2016

IRS Rejects Tax Exempt Status of Non-MSSP ACOs: An Alternate Tax Subsidy Suggestion
Kelvin Ault, CPA (PricewaterhouseCoopers LLP, Nashville, TN)
John B. Beard (Baker Donelson Bearman Caldwell and Berkowitz PC, Jackson, MS)

This Executive Summary provides a brief review of the Internal Revenue Service (IRS) analysis and holdings in PLR 201615022 regarding the issue of whether an Accountable Care Organization (ACO) that does not participate in the Medicare Shared Savings Program (MSSP) can qualify for tax exempt status under Section 501(c)(3) of the Code. Because the IRS has rejected tax exempt status, generally, for non-MSSP ACOs, the authors pose a suggested legislative alternative to tax exempt status involving the use of a state law nonprofit benefit corporation structure, coupled with tax credits modeled after the New Markets Tax Credit program.

We would like to thank the authors for sharing their expertise with their colleagues.​​

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